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Groupon to be investigated by Office of Fair Trading

Groupon is to be investigated by the Office of Fair Trading (OFT) after the company was found to have breached UK advertising regulations 48 times in less than a year.

The company has been referred to the OFT by the Advertising Standards Authority (ASA), the first business since Ryanair got into hot water back during 2008’s price war with easyJet.

Most recently, the ASA banned a promotion for cosmetic surgery, stating that it "pressured" consumers into making potentially life-changing decisions in just a few hours.

The Guardian reports that the ASA said that it was referring Groupon over three specific concerns: "failure to conduct promotions fairly, such as not making clear significant terms and conditions"; "failure to provide evidence that offers are available"; and "exaggeration of savings claims".

We are taking this approach because, given Groupon's track record, we have serious concerns about its ability to adhere to the advertising code. It is in the public interest that we refer the matter to the OFT."

The OFT is expected to launch a wider investigation into the daily deals market to examine advertising and pricing practices across several companies.

Groupon filed for an IPO listing of $12.7bn last month, amid a flurry of web-based businesses that did the same. Yelp, LinkedIn, Zynga and Angie's List were among these, but Groupon was the second-biggest internet company ever to become publicly listed. However, its share price has since slumped.

As we’ve noted before, it’s been said that 2012 will be the year that the deals market evolves or dies. Is this is the beginning of the end for one its biggest players? Or will it simply be just another slap on the wrist?

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Comments (2)

buyer beware

It would be unfair to focus on Groupon only as all these businesses are clones. I lost about £15 to KGB on vouchers. I just could never get anywhere near redeeming them. I waited six months to the end of the deal thinking that was reasonable by which time the company I was supposed to be receive product off in exchange for vouchers seemed to have gone bust or at least was totally not contactable. By that time KGB said you're not owed a refund from the vouchers, you're too late.

More fool me for being an idiot and thinking I could have something for next to nothing.

Tough call really as to whether it will evolve or die - people are always going to want deals, the demand will be there.

However, I doubt Groupon, based on their current business model, will thrive in 2012.

They are effectively just a massive mailing list whilst businesses are increasingly finding that signing up for a deal is costing them massively over the short term for a temporary influx of customers, with little to no benefit long term.

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